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The Zacks Analyst Blog Highlights: Ultra Clean, Tennant, Cohu, DXP Enterprises and H&E Equipment Services
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For Immediate Release
Chicago, IL – December 19, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Ultra Clean Holdings Inc. (UCTT - Free Report) , Tennant Co. (TNC - Free Report) , Cohu Inc. (COHU - Free Report) , DXP Enterprises Inc. (DXPE - Free Report) and H&E Equipment Services Inc. (HEES - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Is U.S. Manufacturing Showing Signs of Recovery? 5 Top Picks
The U.S. manufacturing industry, which faced severe challenges in 2019 owing to the lingering trade conflict and tariff war with China, is showing signs of recovery. Moreover, 2020 should bring good tidings as the two countries recently agreed to sign a phase-one deal to resolve the tariff war in the first half of January.
U.S. Manufacturing Showing Signs of Improvement
On Dec 17, the Department of Commerce reported that industrial production jumped 1.1% in November, surpassing the consensus estimate of 0.8% and reversing a 0.9% reduction in October. November’s metric marks the biggest gain in more than two years.
Notably, within overall industrial production, manufacturing output jumped 1.1% in November supported by a 12.4% gain in production of cars and trucks and related parts. Excluding this component, industrial production and manufacturing output grew 0.5% and 0.3% in the last month.
Overall, industrial production rose 2.1% for consumer goods and 1.7% for business equipment. Additionally, capacity utilization, which is a measure of how firms are using their resources, increased to 77.3% to 76.6 in October. However, the metric is still below the pre-recession level of 80%. This will prevent production cost and prices to rise exorbitantly.
Is Slowdown in Business Spending Bottoming Out?
The imposition of tariff on China-made, low-cost intermediary products raised the input cost of U.S. manufacturers. Consequently, U.S. business spending dropped significantly in 2019. The Institute of Supply Management reported that U.S. manufacturing activities contracted for four consecutive months from August to November.
On Nov 27, the Department of Commerce reported that new orders for manufactured durable goods increased $1.5 billion or 0.6% to $248.7 billion in October. More important information from the report was that the core durable goods order (which excludes defense aircraft) jumped 1.2% in October.
The core durable goods data for October indicate that business spending is likely to continue although the pace may decline considerably. Therefore, stabilization of business investment in October will act as a relief to the manufacturing sector. Additionally, new orders for core capital goods is a leading metric to calculate equipment spending in the U.S. government’s GDP measurement. Notably, manufacturing activities constituted nearly 12% of U.S. GDP.
U.S-China Phase-One Trade Deal
On Dec 13, both United States and China declared that they have reached a phase-one trade deal likely to be signed by the two presidents in the first half of January. Per the deal, the United States will reduce the tariff rate from 15% to 7.5% on $120 billion Chinese exports. Moreover, the Trump administration will also cancel the imposition of 15% tariff on fresh $160 billion Chinese products mainly used for making consumer goods.
On the other hand, China has pledged to purchase $40 billion agricultural products from the United States per year. U.S. officials are still trying to raise the threshold to $50 billion per annum. Moreover, China will also rollback on some tariffs imposed on U.S. exports. U.S. Trade Representative Robert Lighthizer said the deal will address intellectual-property issues along with strong enforcement provisions and financial services and currency issues.
Our Top Picks
At this stage, we have narrowed down our search to five manufacturing stocks that popped in 2019 and still have momentum for the next year. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Ultra Clean Holdings Inc.designs, develops, prototypes, engineers, manufactures, and tests production tools, modules and subsystems for the semiconductor and display capital equipment industries primarily in North America, Asia, and Europe. The company has an expected earnings growth rate of 47.4% for next year. The Zacks Consensus Estimate for next year improved 28.4% over the last 60 days. The Zacks Rank #1 stock has rallied 172% year to date.
Tennant Co.is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, significantly reduce their environmental impact and help create a cleaner, safer, healthier world. The company has an expected earnings growth rate of 1% for next year. The Zacks Consensus Estimate for the 2020 improved 4.4% over the last 60 days. The Zacks Rank #1 stock has soared 50.1% year to date.
Cohu Inc.is a leading supplier of semiconductor test and inspection handlers, micro-electro mechanical system test modules, test contactors and thermal sub-systems used by global semiconductor manufacturers and test subcontractors. It operates through two segments, Semiconductor Test and Inspection Equipment, and PCB Test Equipment. The company has an expected earnings growth rate of 681% for next year. The Zacks Consensus Estimate for next year improved 5.8% over the last 60 days. The Zacks Rank #1 stock has climbed 32.3% year to date.
DXP Enterprises Inc.is engaged in distributing maintenance, repair, and operating products, equipment, and services to energy and industrial customers in the United States. It operates in three segments: Service Centers, Supply Chain Services, and Innovative Pumping Solutions. The company has an expected earnings growth rate of 10.5% for next year. The Zacks Consensus Estimate for next year improved 1.9% over the last 60 days. The Zacks Rank #2 stock has surged 49.3% year to date.
H&E Equipment Services Inc.is one of the largest integrated equipment services companies in the United States. It operates in five segments: Equipment Rentals, New Equipment Sales, Used Equipment Sales, Parts Sales, and Repair and Maintenance Services. The company has an expected earnings growth rate of 7% for next year. The Zacks Consensus Estimate for next year improved 3.8% over the last 60 days. The Zacks Rank #2 stock has jumped 58.8% year to date.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Ultra Clean, Tennant, Cohu, DXP Enterprises and H&E Equipment Services
For Immediate Release
Chicago, IL – December 19, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Ultra Clean Holdings Inc. (UCTT - Free Report) , Tennant Co. (TNC - Free Report) , Cohu Inc. (COHU - Free Report) , DXP Enterprises Inc. (DXPE - Free Report) and H&E Equipment Services Inc. (HEES - Free Report) .
Here are highlights from Wednesday’s Analyst Blog:
Is U.S. Manufacturing Showing Signs of Recovery? 5 Top Picks
The U.S. manufacturing industry, which faced severe challenges in 2019 owing to the lingering trade conflict and tariff war with China, is showing signs of recovery. Moreover, 2020 should bring good tidings as the two countries recently agreed to sign a phase-one deal to resolve the tariff war in the first half of January.
U.S. Manufacturing Showing Signs of Improvement
On Dec 17, the Department of Commerce reported that industrial production jumped 1.1% in November, surpassing the consensus estimate of 0.8% and reversing a 0.9% reduction in October. November’s metric marks the biggest gain in more than two years.
Notably, within overall industrial production, manufacturing output jumped 1.1% in November supported by a 12.4% gain in production of cars and trucks and related parts. Excluding this component, industrial production and manufacturing output grew 0.5% and 0.3% in the last month.
Overall, industrial production rose 2.1% for consumer goods and 1.7% for business equipment. Additionally, capacity utilization, which is a measure of how firms are using their resources, increased to 77.3% to 76.6 in October. However, the metric is still below the pre-recession level of 80%. This will prevent production cost and prices to rise exorbitantly.
Is Slowdown in Business Spending Bottoming Out?
The imposition of tariff on China-made, low-cost intermediary products raised the input cost of U.S. manufacturers. Consequently, U.S. business spending dropped significantly in 2019. The Institute of Supply Management reported that U.S. manufacturing activities contracted for four consecutive months from August to November.
On Nov 27, the Department of Commerce reported that new orders for manufactured durable goods increased $1.5 billion or 0.6% to $248.7 billion in October. More important information from the report was that the core durable goods order (which excludes defense aircraft) jumped 1.2% in October.
The core durable goods data for October indicate that business spending is likely to continue although the pace may decline considerably. Therefore, stabilization of business investment in October will act as a relief to the manufacturing sector. Additionally, new orders for core capital goods is a leading metric to calculate equipment spending in the U.S. government’s GDP measurement. Notably, manufacturing activities constituted nearly 12% of U.S. GDP.
U.S-China Phase-One Trade Deal
On Dec 13, both United States and China declared that they have reached a phase-one trade deal likely to be signed by the two presidents in the first half of January. Per the deal, the United States will reduce the tariff rate from 15% to 7.5% on $120 billion Chinese exports. Moreover, the Trump administration will also cancel the imposition of 15% tariff on fresh $160 billion Chinese products mainly used for making consumer goods.
On the other hand, China has pledged to purchase $40 billion agricultural products from the United States per year. U.S. officials are still trying to raise the threshold to $50 billion per annum. Moreover, China will also rollback on some tariffs imposed on U.S. exports. U.S. Trade Representative Robert Lighthizer said the deal will address intellectual-property issues along with strong enforcement provisions and financial services and currency issues.
Our Top Picks
At this stage, we have narrowed down our search to five manufacturing stocks that popped in 2019 and still have momentum for the next year. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Ultra Clean Holdings Inc.designs, develops, prototypes, engineers, manufactures, and tests production tools, modules and subsystems for the semiconductor and display capital equipment industries primarily in North America, Asia, and Europe. The company has an expected earnings growth rate of 47.4% for next year. The Zacks Consensus Estimate for next year improved 28.4% over the last 60 days. The Zacks Rank #1 stock has rallied 172% year to date.
Tennant Co.is a world leader in designing, manufacturing and marketing solutions that empower customers to achieve quality cleaning performance, significantly reduce their environmental impact and help create a cleaner, safer, healthier world. The company has an expected earnings growth rate of 1% for next year. The Zacks Consensus Estimate for the 2020 improved 4.4% over the last 60 days. The Zacks Rank #1 stock has soared 50.1% year to date.
Cohu Inc.is a leading supplier of semiconductor test and inspection handlers, micro-electro mechanical system test modules, test contactors and thermal sub-systems used by global semiconductor manufacturers and test subcontractors. It operates through two segments, Semiconductor Test and Inspection Equipment, and PCB Test Equipment. The company has an expected earnings growth rate of 681% for next year. The Zacks Consensus Estimate for next year improved 5.8% over the last 60 days. The Zacks Rank #1 stock has climbed 32.3% year to date.
DXP Enterprises Inc.is engaged in distributing maintenance, repair, and operating products, equipment, and services to energy and industrial customers in the United States. It operates in three segments: Service Centers, Supply Chain Services, and Innovative Pumping Solutions. The company has an expected earnings growth rate of 10.5% for next year. The Zacks Consensus Estimate for next year improved 1.9% over the last 60 days. The Zacks Rank #2 stock has surged 49.3% year to date.
H&E Equipment Services Inc.is one of the largest integrated equipment services companies in the United States. It operates in five segments: Equipment Rentals, New Equipment Sales, Used Equipment Sales, Parts Sales, and Repair and Maintenance Services. The company has an expected earnings growth rate of 7% for next year. The Zacks Consensus Estimate for next year improved 3.8% over the last 60 days. The Zacks Rank #2 stock has jumped 58.8% year to date.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.